The Union Cabinet on Thursday gave in-principle approval to the proposal to set up a Rail Tariff Authority (RTA), which would be responsible for fare determination for the Indian Railways.

The RTA, which will be a four-member body headed by its chairman, would be assigned with the responsibility of suggesting the floor levels for freight and passenger rates.

A government official with direct knowledge of the proposal said that the RTA would not only be limited to making recommendations about the fares as it will have strong guiding principle for determining fares.

The idea for setting up an authority for determining railway fares was mooted by former railway minister & TMC leader Dinesh Trivedi in the Rail Budget 2012-13.

The creation of the RTA is expected to help in improving the financial health of the national carrier by de-linking it from politics. 

The railway is suffering an annual loss of around Rs 25,000 in passenger segment because political considerations prevent it from increasing fares in line with increase in input costs.